Germany Property Market Update 2016

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Germany Property Market Update 2016

April 20, 2016

 If you’re looking to sell property in Germany, you would be pleasantly surprised to learn that there’s a lot of interest in the German residential property market right from foreign investors. This is unusual as Germany was never anybody’s favourite overseas property destination in the past, and it’s nice to see the country get so much attention.

Indeed, there are many wealthy individuals from emerging nations such as China, Russia, Brazil, who are looking to invest in Germany. Berlin still has a long way to go before it can be spoken about in the same breath as London and New York. But there is no question that properties in Berlin are highly prized, as are properties in Munich, Frankfurt and Hamburg.

To be fair, Europe is in a bit of a mini-crisis at the moment. There is a huge refugee problem in Europe, with millions of refugees from Syria and other poor countries trying to get into Germany, Sweden and other countries.

The UK is on the brink of leaving the European Union with the referendum to decide whether Britain remains in the EU or not to be held on June 23, 2016. Spain is a political crisis of its own with the general elections of December, 2015 throwing up a fragmented outcome. Greece has been yet to recover from the economic crisis.

In the middle of all this, Germany remains an oasis of calm. The German economy continues to march on, just as before. Germany is today one of the most powerful countries in the world, at par with the United States and China. German companies are in the pink of health and employment is at a record high.

No wonder so many investors find Germany so attractive. Germany is a safe haven for their investments. Wealthy Chinese, Russian or Brazilian investors know that their money will be safe in Germany. Germany is easily the most stable country in the world, politically and economically.

So what to expect in 2016? The German property market is healthier than ever. Prices of luxury apartments in Berlin have risen by 9% in 2015. In Munich, residential property prices have increased by 8%. Frankfurt has done well too, with property prices here rising by 7.5%.

The growth in property prices in Germany is uniform across all cities. It’s not just the big cities such as Berlin, Frankfurt, Munich, Hamburg and Cologne that are doing well; even smaller cities such as Dortmund, Bremen, Stuttgart, Dusseldorf and Essen are attracting a lot of interest from overseas buyers.

However, for the German property market to really shine, the government must stop regulating rental prices in the country. Rents in Germany have an upper limit that is decided by the government – landlords cannot raise the rent of an apartment beyond a point.

Since the rental prices of apartments in Germany are kept artificially low, most people in the country would rather rent a house than buy one. The rate of homeownership in Germany is very low compared to other developed nations such as Spain or the United States.

As a result the property market in Germany remains highly restrained and will remain so as long as the government continues to control rental prices in the country. Still, there is no mistaking the high level of interest in German properties from foreign investors. We expect more good news ahead for the real estate market in the country and for things to get better in Germany in 2016 and beyond.